Litkraft Limited v Simon Cottrell & Ors.

A fee arrangement between a claims management company and solicitors may be enforceable despite regulatory non-disclosure where the illegality consists only of the solicitors’ failure to notify clients, and the claims management company has complied with its own obligations. The court must assess illegality by reference to the public-interest factors identified in Patel v Mirza. Contractual liability for services is not generally conditional on delivery of a VAT invoice unless the contract so provides. Where translation fees depend on recovery from a third party, solicitors must consider submitting the invoice and explain any refusal. Solicitors remain liable for fees accrued before transferring a successful case to another firm.

The claimant, a claims management company, introduced personal injury clients to a firm of solicitors under a written 2013 agreement. The parties later exchanged emails concerning enhanced fees for high-value cases. A subsequent settlement agreement referred to a 17.5 per cent fee, capped at £10,000.

The claimant sought unpaid fees and a determination of preliminary issues concerning contractual variation, illegality, estoppel, VAT invoices, translation fees and transferred cases. The principal questions were whether the high-value fee had been agreed, whether it was unenforceable for regulatory non-disclosure, and how the parties’ obligations were to be construed.

1. High-value fees. The emails of 21 and 29 January 2014 objectively constituted an offer and acceptance of a fee of 17.5 per cent of recovered profit costs, capped at £10,000, for qualifying high-value cases. The communications contained no express or implied condition that a further written contract or regulatory approval was required. The arrangement was best characterised as a variation of the parties’ pre-existing oral agreement concerning fees, rather than a variation of the written 2013 contract or a separate new contract (paras [136]–[147]).
2. Estoppel. Alternatively, the Settlement Agreement recorded a common assumption that the high-value fee was payable. That assumption had crossed the line into an express shared commitment. The claimant relied on it by continuing to provide services, making it unconscionable for the defendants to resile from it (paras [149]–[153]).
3. Illegality. The court declined to apply Westlaw Services Ltd v Boddy, because fee-sharing agreements were no longer inherently unlawful. Applying the public-interest analysis in Patel v Mirza, enforcement was not barred where the claimant had disclosed that it was paid by solicitors, had not breached the applicable claims-management rules, and the relevant non-disclosure was the solicitors’ breach. Denying payment for valuable services would not further the purpose of the notification requirement and would be disproportionate (paras [154]–[162]).
4. Other fees. Payment was not conditional on a valid VAT invoice absent an express or implied contractual term (para [165]). Translation-fee obligations arose from the parties’ course of dealings. The defendants had to consider submitting invoices, could decline where they had good reason to doubt recoverability, and had to explain any refusal. If the third party did not pay, the claimant could not recover the fee (paras [166]–[170]). The defendants remained liable for fees accrued before transfer of a case to another firm, provided the claim ultimately succeeded (paras [171]–[174]).
5. The preliminary issues were determined accordingly. Issues concerning the new contract, settlement construction and quantum meruit were academic or fell away.